(1)

In April 2020, the European Commission (‘the Commission’) imposed a definitive anti-dumping duty on imports of certain woven and/or stitched glass fibre fabrics (‘GFF’) originating in the People’s Republic of China (‘the PRC’ or ‘China’) and Egypt by Commission Implementing Regulation (EU) 2020/492 (2), as amended by Commission Implementing Regulation (EU) 2020/776 (3). The anti-dumping measures took the form of an ad valorem duty ranging between 34 % and 69 % for imports originating in the PRC, and 20 % for imports originating in Egypt.

(2)

The Commission received a request pursuant to Articles 13(3) and 14(5) of the basic Regulation to investigate the possible circumvention of the anti-dumping measures imposed on imports of GFF originating in the PRC and Egypt by imports consigned from Morocco, whether declared as originating in Morocco or not, and to make such imports subject to registration.

(3)

The request was lodged on 19 May 2021 by TECH-FAB Europe e.V, an association of EU producers of GFF (‘the applicant’).

(4)

The request contained sufficient evidence of a change in the pattern of trade involving exports from China, Egypt and Morocco to the Union that had taken place following the imposition of measures on GFF. The change in the pattern of trade appeared to stem from a practice, process or work for which there is insufficient due cause or economic justification other than the imposition of the duty.

(5)

Furthermore, the request contained sufficient evidence showing that the practice, process or work were undermining the remedial effects of the existing anti-dumping measures in terms of quantity and prices. Significant volumes of imports of the product under investigation appeared to have entered the EU market. In addition, there was sufficient evidence that imports of GFF were made at injurious prices.

(6)

Finally, the request contained sufficient evidence that GFF consigned from Morocco were exported at dumped prices in relation to the normal value previously established for GFF.

(7)

The product concerned is fabrics of woven, and/or stitched continuous filament glass fibre rovings and/or yarns with or without other elements, excluding products which are impregnated or pre-impregnated (pre-preg), and excluding open mesh fabrics with cells with a size of more than 1,8 mm in both length and width and weighing more than 35 g/m2, classified on the date of entry into force of Implementing Regulation (EU) 2020/492 under CN codes ex 7019 39 00, ex 7019 40 00, ex 7019 59 00 and ex 7019 90 00 (TARIC codes 7019390080, 7019400080, 7019590080 and 7019900080) and originating in the People’s Republic of China and Egypt (‘the product concerned’). This is the product to which the measures that are currently in force apply.

(8)

The product under investigation is the same as that defined in the previous recital, currently falling under CN codes ex 7019 61 00, ex 7019 62 00, ex 7019 63 00, ex 7019 64 00, ex 7019 65 00, ex 7019 66 00, ex 7019 69 10, ex 7019 69 90, ex 7019 72 00, ex 7019 73 00, ex 7019 80 10, ex 7019 80 90, and ex 7019 90 00, but consigned from Morocco, whether declared as originating in Morocco or not (TARIC codes 7019 61 00 81, 7019 62 00 81, 7019 63 00 81, 7019 64 00 81, 7019 65 00 81, 7019 66 00 81, 7019 69 10 81, 7019 69 90 81, 7019 72 00 81, 7019 73 00 81, 7019 80 10 81, 7019 80 90 81, and 7019900081) (‘the product under investigation’) (4).

(9)

The investigation showed that GFF exported from China and Egypt to the Union and GFF consigned from Morocco, whether originating in Morocco or not, have the same basic physical and chemical characteristics and have the same uses, and are therefore considered as like products within the meaning of Article 1(4) of the basic Regulation.

(10)

Having determined, after having informed the Member States, that sufficient evidence existed for the initiation of an investigation pursuant to Article 13(3) of the basic Regulation, the Commission initiated the investigation and made imports of GFF consigned from Morocco, whether declared as originating in Morocco or not, subject to registration, by Commission Implementing Regulation (EU) 2021/864 on 28 May 2021 (5) (‘the initiating Regulation’).

(11)

LM Wind Power, a wind blade manufacturer established in the Union, argued that the initiation of the investigation was not justified due to a lack of sufficient evidence, and the investigation should therefore be immediately terminated.

(12)

It argued that circumvention did not occur since the practice, process or work taking place in Morocco did not fall within any of the categories of the fourth subparagraph of Article 13(1) of the basic Regulation. In particular, the practice, process or work cannot be qualified as a slight modification, as the product under investigation is a downstream product and, as such, a different product than its input materials (mainly glass fibre rovings), or an assembly operation, in particular since the product under investigation and glass fibre rovings are not classified under the same tariff headings.

(13)

It also claimed that there was sufficient due cause and economic justification for the practice, process or work taking place in Morocco via the establishment by PGTEX China of a GFF production plant in Morocco (PGTEX Morocco SARL) within the meaning of Article 13(1) of the basic Regulation. In this respect, it claimed that there is a significant demand for GFF in Morocco as a user (6) of GFF established in Morocco in 2017 needs around 5 000 tonnes of GFF per year. There are conventional customs duties of up to 7 % in place on imports of GFF from China, while exports of GFF from Morocco to the Union are not subject to conventional customs duties pursuant to the Euro-Mediterranean Partnership Agreement.

(14)

The Egyptian authorities claimed that they had been unfairly involved in the present investigation as no circumvention practice has taken place involving Egypt. In this respect, the Egyptian authorities claimed that all necessary procedures and measures were taken in Egypt to prevent circumvention since the original anti-dumping investigation. They also argued, similar to the claims of LM Wind Power, that there was a lack of evidence to prove circumvention in a form of either assembly operations in Morocco involving the exports of glass fibre rovings from Egypt or transhipment between Morocco and the EU involving GFF from Egypt.

(15)

The Moroccan authorities requested the Commission to conclude that PGTEX Morocco SARL was not circumventing the measures imposed by the Union and to terminate the ongoing investigation. They stated that the establishment of PGTEX Morocco SARL in Morocco was the result of an authentic and long-term partnership, involving the PGTEX Group (7) and Morocco. They also stated that the production process of PGTEX Morocco SARL involved significant investments and extensive operations and contributed to the Moroccan economy. As a result, even if a change in the pattern of trade could be established, this would appear not to be caused by a practice of circumvention. Finally, the Moroccan authorities claimed that their official statistics refuted the allegation of the applicant that PGTEX Morocco SARL circumvented the measures in force by means of transhipment.

(16)

With regard to the claims related to the initiation referred to above the Commission recalled that the investigation was initiated on the basis of the evidence provided in the request concerning assembly operations, not transhipment or slight modification. The request provided sufficient evidence (8) of the existence of assembly operations, one of the practices specifically mentioned in Article 13(1), in Morocco, and that these assembly operations were done using glass fibre rovings from the PRC and Egypt (9). It also contained sufficient evidence (10) that such practice constituted circumvention according to Article 13(2). The tariff classification of the product under investigation or its main input materials is irrelevant for determining whether an assembly operation constitutes circumvention.

(17)

The request also provided sufficient evidence regarding the lack of economic justification other than the duties, such as PGTEX China's 2019 Annual Report. According to this report, the main purpose of the establishment of PGTEX Morocco was "to actively respond to the EU's anti-dumping investigation against China, further optimize and adjust its internationalization strategy, consolidate and increase the market share of products in Europe and the United States, meet customer demand, and protect customer supply” and in particular that PGTEX "decided to build a wholly-owned subsidiary in Morocco to break through the EU's anti-dumping investigations, approach customers, meet market demand, and adapt to sustainable development."  (11).

(18)

Therefore, the Commission rejected the claims put forward by LM Wind Power, and the Moroccan and Egyptian authorities that the request did not contain sufficient evidence to warrant the initiation of the investigation.

(19)

The investigation period covered the period from 1 January 2019 to 31 December 2020 (‘the investigation period’ or ‘IP’). Before 2019, there were no significant export volumes of GFF from Morocco to the Union. Data were collected for the IP to investigate, inter alia, the alleged change in the pattern of trade following the imposition of measures on the product concerned, and the existence of a practice, process or work for which there was insufficient due cause or economic justification other than the imposition of the duty. More detailed data were collected for the period from 1 January 2020 to 31 December 2020 (‘the reporting period’ or ‘RP’) in order to examine if imports were undermining the remedial effect of the measures in force in terms of prices and/or quantities and the existence of dumping.

(20)

The Commission officially informed the authorities of China, Egypt and Morocco, the known exporting producers in those countries, the Union industry and the President of the EU-Morocco Association Council of the initiation of the investigation.

(21)

In addition, the Commission asked the Mission of Morocco to the European Union to provide it with the names and addresses of exporting producers and/or representative associations that could be interested in participating in the investigation other than PGTEX Morocco SARL, the only producer of the product under investigation according to the request. The Moroccan authorities submitted a reply, listing three other companies. Two of those companies did not come forward, the third one did but declared that it did not export GFF to the Union.

(22)

Exemption claim forms for the producers/exporters in Morocco, questionnaires for the producers/exporters in China and Egypt, and for importers in the Union were made available on DG TRADE’s website.

(23)

Only PGTEX Morocco SARL submitted an exemption claim form and also requested a hearing that took place on 21 June 2021. Moreover, as mentioned in recital (43), PGTEX Group requested and was invited to a hearing with the Commission on 10 January 2022, and a hearing with the Hearing Officer in Trade Proceedings on 12 January 2022.

(24)

Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set in the initiating Regulation. All parties were informed that the non-submission of all relevant information or the submission of incomplete, false or misleading information might lead to the application of Article 18 of the basic Regulation and to findings being based on the facts available.

(25)

On 20 December 2021 (the day of the disclosure), the Commission received a submission (dated 16 December 2021) from the Moroccan authorities, which was too late to be taken into consideration at disclosure stage. Following disclosure, the Moroccan authorities sent a second submission, summarizing its submission of 16 December 2021. In essence, the Moroccan authorities reiterated their request to terminate the investigation and put forward the following arguments.

(26)

First, the Moroccan authorities claimed that GFF is manufactured by PGTEX Morocco SARL through activities that cannot be qualified as a completion or assembly operation. Second, they claimed that these products are “originating” in Morocco within the meaning of Article 29 (12) of the EU-Morocco Association Agreement (13) and further detailed under the list rules contained in Annex II of Protocol 4 of the EU-Morocco Association Agreement. In addition, pursuant to Article 9 of the EU-Morocco Association Agreement, “products originating in Morocco shall be imported into the Community free of customs duties and charges having equivalent effect” and that the EU – Morocco Association Agreement provides only for some exceptions. This preferential origin was also confirmed by the Moroccan Customs Administration, which issued preferential origin certificates (EUR.1) for PGTEX’s GFF exports to the EU pursuant to Article 17 of Protocol 4 of the EU-Morocco Association Agreement.

(27)

The Commission rejected the claim that the processing in Morocco of imported glass fibre rovings into GFF could not be qualified as an assembly or completion operation. Article 13(2) of the basic Regulation does not only cover the assembly operations of (several) parts into a finished product, but also the completion/conversion operations of intermediary products into the product concerned. This follows, in particular from point (b) of Article 13(2) of the basic Regulation, which stipulates that ‘…the value added to the parts brought in, during the assembly or completion operation, is greater than...’ In addition, the fact that the Moroccan custom authorities issued EUR.1 certificates to PGTEX Morocco SARL confirming their preferential origin under the Association Agreement is irrelevant as the applicable legal basis for this anti-circumvention investigation is the basic Regulation, in particular Article 13 thereof (14).

(28)

Furthermore, following disclosure, the Moroccan authorities, supported by PGTEX Morocco, claimed that the anti-circumvention investigation was not permitted pursuant to Article 24 of the EU-Morocco Association Agreement, as this Article only allows for the imposition of anti-dumping measures on Moroccan products if the conditions of Article VI of the General Agreement on Tariffs and Trade are met.

(29)

The Commission rejected this claim: Article 24 of the EU-Morocco Association Agreement does not preclude any anti-circumvention investigation, also given the fact that this Article also refers to the related internal legislation. When Morocco and the EU ratified the Association Agreement in 2000, the applicable basic Regulation already contained anti-circumvention provisions.

(30)

Finally, the Moroccan authorities, as well as PGTEX Morocco, claimed that the Commission’s anti-circumvention investigation was not permitted under the WTO rules, in particular pursuant to Article VI of the GATT and the Agreement on Implementation of Article VI.

(31)

The Commission rejected the claim and referred to paragraph 20 of the preamble of the basic Regulation (15), which sets out the approach of the Commission in this respect. On this basis, like many other WTO members, the Union legislation contains provisions to tackle circumvention practices.

(32)

In accordance with Article 13(1) of the basic Regulation, the following elements should be analysed in order to assess possible circumvention:

(33)

Since the evidence provided by the applicant in the request pointed to assembly operations in Morocco, the Commission more specifically analysed whether the criteria set out in Article 13(2) of the basic Regulation were met, in particular:

(34)

Only PGTEX Morocco SARL submitted a request for exemption in accordance with Article 13(4) of the basic Regulation. PGTEX Morocco SARL belongs to the Chinese Group PGTEX and is located in a Free Trade Zone in Tanger, Morocco.

(35)

In addition, its two related Chinese companies Chongqing Polycomp International Corporation (‘CPIC’) and PGTEX China Co., Ltd (‘PGTEX China’) also submitted questionnaire replies. PGTEX Morocco SARL is a wholly owned subsidiary of PGTEX China, which is subject to an anti-dumping duty of 37,6 % imposed by Implementing Regulation (EU) 2020/492, as amended by Implementing Regulation (EU) 2020/776.

(36)

The questionnaire replies, including the response to a deficiency letter, of PGTEX Morocco SARL and its two Chinese related companies (‘PGTEX Group’) were found to be deficient for the following reasons:

(37)

Therefore, in accordance with Article 18(4) of the basic Regulation the Commission informed the PGTEX Group, on 5 October 2021, of the fact that the non-exhaustive list of elements described in the previous recital might lead to the application of Article 18 of the basic Regulation and to the use of facts available. It also invited the PGTEX Group to comment on the possible application of Article 18 of the basic Regulation.

(38)

On 12 October 2021, the PGTEX Group claimed that the application of facts available was not legally justified in the present case for the following reasons:

(39)

The Commission analysed the information and documents that the PGTEX Group submitted with its letter of 12 October 2021. It concluded that neither satisfactory replies nor convincing supporting documentation were provided on most elements that were raised in its letter of 5 October 2021.

(40)

Accordingly, the Commission considered that the information provided by the PGTEX Group was partially incomplete and contradictory and thus could not be fully relied on by the Commission. Nevertheless, the data submitted by the PGTEX Group were not wholly disregarded, and the Commission used both the sales and cost data submitted by the PGTEX Group as a starting point of its analysis.

(41)

In accordance with Article 18(1) first sentence and Article 18(5) of the basic Regulation, the information provided by the PGTEX Group was complemented by data extracted from databases such as the Global Trade Atlas (‘GTA’) (16), and Eurostat, as further detailed in section 2.3. below. Import data were extracted from Eurostat, and GTA was used for the determination of export volumes of glass fibre rovings from the PRC and Egypt into Morocco.

(42)

Finally, in view of the outbreak of COVID-19 and the confinement measures put in place by various Member States as well as by various third countries, the Commission could not carry out verification visits pursuant to Article 16 of the basic Regulation at the premises of the cooperating legal entities. The Commission considered the information submitted by the PGTEX Group, such as replies to questionnaires and replies to deficiency letters, in line with the Notice of 16 March 2020 on the consequences of the COVID-19 outbreak on anti-dumping and anti-subsidy investigations. (17) No remote-cross check of the information was deemed necessary in light of the issues set out in the previous recitals.

(43)

Following disclosure, the PGTEX Group reiterated its allegation that the application of facts available was manifestly ill-founded and not justified in view of the information provided by the PGTEX Group. In addition, the PGTEX Group requested and was granted a hearing with the Commission on 10 January 2022, and a subsequent hearing with the Hearing Officer in Trade Proceedings on 12 January 2022 regarding the use of facts available under Article 18 of the basic Regulation.

(44)

During the hearing on 12 January 2022, the Commission provided additional explanations concerning its finding that the response to the Article 18 letter had not dispelled the concerns of the Commission. As explained in recital (40), the Commission maintained its position that the information provided by the PGTEX Group could not be fully relied on by the Commission. Moreover, the Hearing Officer in Trade Proceedings stated in the hearing on 12 January 2022 that the Commission had respected the rights of defence of the PGTEX Group.

(45)

Table 1 below shows the development of imports of GFF from China, Egypt and Morocco between 2019 and 2020. As the TARIC codes were only created on 21 February 2019, the Commission extrapolated the data for period of 1 January 2019 to 20 February 2019 to use exactly the same period (12 months) for both years 2019 and 2020.

Table 1

Imports of GFF for the years 2019 and 2020 (tonnes)

(46)

Table 1 shows that the imports of GFF from Morocco increased from277 tonnes in 2019 to 2 809 tonnes in 2020. The significant increase in 2020 compared to 2019 coincided in time with the start of the production by PGTEX Morocco SARL. Although the company was officially established on 2 October 2019, it claimed in its exemption claim form to have started production and export sales only from April 2020 onwards. In this respect, the import data showed that the average monthly imports for the period April – December 2020 were about fifteen times higher than the average monthly imports from January 2019 to March 2020.

(47)

The Commission also noted that the reported export sales of PGTEX Morocco SARL were higher than total imports to the Union from Morocco. Given that PGTEX Morocco SARL was the only Moroccan company that co-operated with the Commission in this investigation and the insignificant export volumes of GFF from Morocco to the Union prior to its establishment, the Commission considered it reasonable to conclude that that PGTEX Morocco SARL was the sole producer in Morocco that exported GFF to the Union during the reporting period (RP).

(48)

As shown in table 1 the imports of GFF from China increased from 13 720 tonnes in 2019 to 19 315 tonnes in 2020, whereas the imports of GFF from Egypt increased from 146 tonnes in 2019 to 4 302 tonnes in 2020. As mentioned in recital (46), the average monthly import volumes of PGTEX Morocco SARL increased considerably from April 2020 onwards, compared to the previous periods.

(49)

Table 2 below shows the development of imports of glass fibre rovings from China and Egypt by Morocco based on the Moroccan import statistics from the GTA database between 2019 and 2020.

Table 2

Imports of glass fibre rovings from Egypt and China by Morocco for the years 2019 and 2020 (in tonnes)

(50)

The main input material for the production of GFF are glass fibre rovings. This input material is then further processed to produce GFF. The evidence available to the Commission showed that the GFF exported to the Union from Morocco was produced from mainly glass fibre rovings.

(51)

Table 2 shows that the imports of glass fibre rovings from China to Morocco substantially increased from 2 378 tonnes in 2019 to 7 839 tonnes in 2020. The imports of glass fibre rovings from Egypt into Morocco also increased from1 297 tonnes in 2019 to 3 687 tonnes in 2020. The imports from both China and Egypt represent around 90 % of the total Moroccan imports of glass fibre rovings for both years 2019 and 2020.

(52)

PGTEX Morocco SARL claimed that the glass fibre rovings that it used to produce GFF were all purchased from China (none from Egypt), in particular from its parent company PGTEX China. It also claimed that it imported these rovings under HS code 7019 12. Imports under this code showed the most significant increase in imports from China by Morocco.

(53)

The significant increase in import volumes of glass fibre rovings from China, as well as from Egypt, to Morocco indicated an increasing demand for such input materials in Morocco, which could, at least in part, be explained by the increase in the production and exports of GFF from Morocco during the reporting period. This was also corroborated by the information provided by PGTEX Morocco SARL.

(54)

Given that PGTEX Morocco SARL, the apparent sole exporter of GFF to the Union, purchased all its glass fibre rovings from China, the Commission did not find any evidence that the glass fibre rovings from Egypt were used, either by PGTEX Morocco SARL or by any other producer of GFF in Morocco for export to the Union. In this respect, the imports of glass fibre rovings from China started to increase from the last quarter of 2019 onwards, which was the quarter in which PGTEX Morocco SARL was established. The monthly average import volume of glass fibre rovings from China during the last quarter of 2019 was considerably higher than the monthly average import volumes during the previous periods. Moreover, the monthly average import volumes of glass fibre rovings during 2020 (the year in which PGTEX Morocco SARL started its production) was also much higher than the monthly average import volumes during the last quarter of 2019. Despite the increase of imports of glass fibre rovings from Egypt into Morocco during 2020, the Commission found no evidence that those imports was used for further processing in Morocco into GFF to be subsequently exported to the Union. Hence, the evidence available to the Commission did not support the allegation that the change in pattern of trade involving Egypt stemmed from a practice the purpose of which was to avoid anti-dumping measures on GFF from Egypt.

(55)

Following disclosure, the PGTEX Group as well as LM Wind Power claimed that there was no change in the pattern of trade. The PGTEX Group argued that the emergence of imports of GFF from Morocco was not made to the detriment of imports of GFF from China. On the contrary, the increase in imports of GFF from Morocco was less substantial than the parallel increase in imports of GFF from China.

(56)

As explained in recitals (45) – (54) above, the Commission observed an increase of exports of GFF from Morocco to the Union as well as a significant increase of imports of glass fibre rovings from China to Morocco in 2020 as compared to 2019. This in itself constitutes a change in the pattern of trade.

(57)

Further, whilst the overall exports of GFF from China to the Union indeed increased, the overview tables provided by PGTEX China in the framework of this anti-circumvention investigation showed that the export volumes of PGTEX China - the mother company of PGTEX Morocco and its sole supplier of glass fibre rovings - to the Union were more than 2 times lower in 2020 compared to 2018, and more than 3 times lower in 2020 than in 2019.

(58)

The Commission could therefore establish a change of the pattern of trade and rejected the claims.

(59)

The increase of exports of GFF from Morocco to the Union constitutes a change in the pattern of trade between Morocco and the Union within the meaning of Article 13(1) of the basic Regulation, together with the significant increase in 2020 compared to 2019 of Chinese exports of glass fibre rovings into Morocco as shown in table 2. On the other hand, no evidence was found concerning the alleged circumvention of measures on GFF involving Egypt.

(60)

Article 13(1) of the basic Regulation requires that the change in the pattern of trade stems from a practice, process or work for which there is insufficient due cause or economic justification other than the imposition of the duty. The practice, process or work includes the consignment of the product subject to the existing measures via third countries and the assembly of parts/completion operations in a third country in accordance with Article 13 (2) of the basic Regulation.

(61)

According to the submission of the Moroccan authorities referred to in recital (15), the first contact with the PGTEX Group for the set-up of a plant in Morocco dated back to 20 March 2019, one month after the initiation of the original anti-dumping investigation (18). PGTEX Morocco SARL was set up on 2 October 2019, about seven months after the initiation of the investigation. This coincidence in time suggests that the anti-dumping investigation and potential imposition of an anti-dumping duty were the cause of the establishment of PGTEX Morocco SARL.

(62)

Based on the submitted sales listing by PGTEX Morocco SARL, during 2020, all export sales of PGTEX Morocco SARL went to the Union market, whereas only a small fraction of its 2020 production was sold domestically. Moreover, its export sales during 2020 were all sold to customers in the Union, which were supplied in the past by PGTEX China. This again suggested that the anti-dumping investigation and the potential subsequent imposition of definitive anti-dumping duties were the reason for the set-up of PGTEX Morocco SARL. This was explicitly confirmed by the 2019 annual report of PGTEX China (see recital (17)).

(63)

Following disclosure, the PGTEX Group claimed that there was due cause and an economic justification for the establishment of PGTEX Morocco. It claimed that the set-up of the Moroccan plant was the result of a lengthy process, which included feasibility studies, applications to obtain the necessary permits from the Chinese and Moroccan governments, and obtaining those permits.

(64)

The Commission noted that the documentation which the PGTEX Group submitted on 15 October 2021 showed that the Group was assessing a long time before the initiation of the investigation in which country to establish a company. Various potential countries were considered, including Morocco. However, the fact remained that PGTEX Morocco SARL was finally set up on 2 October 2019, about 7 months after the initiation of the original anti-dumping investigation. This coincidence in time suggested that the anti-dumping investigation was a cause for the establishment of PGTEX Morocco SARL. This was further corroborated by a statement of the Moroccan authorities stating that their contacts with PGTEX for the establishment of a plant dated back to 20 March 2019, and as such just after the initiation of the original investigation (19). This demonstrated that formal contacts with the Moroccan authorities to establish a company in Morocco dated back to March 2019, which was just after the initiation of the initial anti-dumping investigation.

(65)

Following disclosure, LM Wind Power argued that PGTEX had set up its Moroccan plant in order to serve the Moroccan and Middle Eastern markets and therefore had an economic justification for its establishment other than avoiding duties.

(66)

The Commission rejected this claim. The Commission referred to evidence demonstrating that there was a lack of economic justification other than the duties (see in this context PGTEX China’s 2019 Annual Report, as referred to in recital (17)). In addition, the argument of LM Wind Power that PGTEX Morocco was set up to serve Moroccan and Middle Eastern markets was not supported by the evidence. In this respect, as explained in recital (62), all export sales by PGTEX Morocco SARL were made to the Union and only a small fraction of its production was sold domestically in Morocco.

(67)

In view of the above, the investigation did not reveal sufficient due cause or an economic justification of the establishment of a GFF production site in Morocco other than to avoid the payment of the anti-dumping duties currently in force.

(68)

Article 13(2) of the basic Regulation requires the assembly operation to have started or substantially increased since, or just prior to, the initiation of the anti-dumping investigation, while the parts concerned are from the country subject to anti-dumping measures.

(69)

The original anti-dumping investigation was initiated in February 2019 and definitive anti-dumping duties were imposed in April 2020 (see recital (1)). PGTEX Morocco SARL was officially established on 2 October 2019 and started production from April 2020 according to its exemption claim form. This coincides with the change in the pattern of trade described in section 2.3.

(70)

PGTEX Morocco SARL submitted a sales listing, showing that all its export sales of own produced GFF went to the Union during the reporting period. Moreover, 100 % of its main input material (mainly glass fibre rovings) were purchased from its related parent company in China. It did not purchase any glass fibre rovings from Egypt or elsewhere.

(71)

Therefore, the Commission concluded that the assembly operation started since the initiation of the original anti-dumping investigation as required by Article 13(2)(a) of the basic Regulation, while the parts concerned are mainly from China, one of the two countries subject to the original anti-dumping measures.

(72)

Article 13(2)(b) of the basic Regulation states that, as far as assembly operations are concerned, another condition to establish circumvention is that the parts (of Chinese origin, in this case) constitute 60 % or more of the total value of the parts of the assembled product and that the added value of the parts brought in, during the assembly or completion operation, is less than 25 % of the manufacturing cost.

(73)

The main raw material to produce GFF is glass fibre rovings. PGTEX Morocco SARL purchased 100 % of the glass fibre rovings it used from its related parent company in China. Through the sewing-knitting process carried out, which is a completion operation in Morocco, these glass fibre rovings were transformed into GFF. According to the submitted information by PGTEX Morocco SARL, the glass fibre rovings constitute almost 100 % of the total value of the parts of the assembled/completed product in the sense of Article 13(2)(b) of the basic Regulation.

(74)

The Commission therefore concluded that the process taking place in Morocco is a completion operation (assembly operation) and that the 60 % criterion set out in Article 13(2)(b) of the basic Regulation was met.

(75)

Following disclosure, the PGTEX Group and LM Wind Power reiterated their claim that the manufacturing of GFF from the imported main raw material glass fibre rovings does not constitute an “assembly of parts by an assembly operation” within the meaning of Article 13(2) of the basic Regulation. In this context, they claimed, first, that glass fibre rovings are not “parts” of GFF but are rather “goods which are subject to a process in the production of another good” and, second, that glass fibre rovings are not “assembled” into GFF, but are processed into GFF by looming and stitching together various types of glass fibre rovings as well as other materials, using complex machinery.

(76)

The Commission rejected these claims. The practice described in recital (73) above can be characterised as a completion operation that falls within the concept of assembly operations under Article 13 of the basic Regulation, as explained in recital (27) above.

(77)

PGTEX Morocco SARL claimed that its value added cost would be above the threshold of 25 %. The two main cost items in the calculation of the added value were the depreciation cost and the rental cost, which were part of the financial data of the reporting period submitted by PGTEX Morocco SARL in its exemption claim form.

(78)

Concerning the depreciation cost, PGTEX Morocco SARL claimed that there were less than ten GFF-machines (20) installed at its premises, and that each of these GFF-machines had been running for 300 out of the 360 days during 2020. It calculated the depreciation amount for the reporting period on the basis of the following three elements:

(79)

The Commission disagreed with this way of calculating the depreciation cost in the framework of the value-added calculation within the meaning of Article 13(2)(b) of the basic Regulation. In particular, using 300 days as an element to calculate the depreciation amount may be acceptable according to the international accounting standards, but led to an overstatement of the calculated depreciation amount in the framework of the value-added calculation by PGTEX Morocco SARL for various reasons. First, as submitted by PGTEX Morocco SARL in its exemption claim form, the capacity utilisation (actual production in kg divided by the actual production capacity in kg) of the GFF-machines was low (22) in the year 2020. Given the low production capacity utilisation the reported depreciation cost was therefore found to have been overstated. Second, four of the GFF-machines were only shipped in November 2019 from Shanghai to Tanger and could not have been running during 300 days in 2020, taking into consideration the shipment time between Shanghai and Tanger, as well as the period required for unloading, installing and testing each of these 4 GFF machines. Third, PGTEX Morocco SARL claimed in its exemption claim form that the production only started in April 2020. If this were to be true, the total running time for each of the installed GFF-machines could only be at a maximum 270 days (from April 2020 to December 2020), without even taking into account any non-operational time caused by stoppages, as a result of required maintenance, days off, and holidays. As a result, the Commission concluded that the depreciation cost to be taken into account for the calculation of the value added cost should be significantly lower than the depreciation cost as calculated by PGTEX Morocco SARL.

(80)

Following disclosure, the PGTEX Group argued that the Commission committed manifest errors of assessment and acted in breach of Article 13(2) of the basic Regulation when performing calculations relating to the value-added. In this context, according to the PGTEX Group, the full depreciation should be considered, as such costs were actually incurred in 2020 for the production of GFF.

(81)

The Commission rejected this claim for the following reasons:

(82)

Following disclosure, the PGTEX Group suggested that, if the Commission was still to adjust the depreciation cost based on the capacity utilization (as communicated by the PGTEX Group in its Annex 7.2. of its letter of 12 October 2021), it should use any of the alternative three methodologies that it proposed in its comments following disclosure:

(83)

The Commission rejected the use of either of the three alternatives that the PGTEX Group proposed in view of a number of inconsistencies the Commission found, in Annex 7.2. of the letter of 12 October 2021, with regard to the proposed alternatives:

Therefore, the Commission concluded that the capacity utilisation rate over the full year of 2020 was the most appropriate indicator to reduce the fully booked depreciation rate in a reasonable way in the framework of the value-added calculation.

(84)

Following disclosure, the applicant claimed that the depreciation cost of the GFF machines should be fully excluded from the added-value calculations, as these machines were not acquired from an independent supplier, but from the parent company.

(85)

The Commission rejected this claim. Depreciation expenses are generally accepted under local and international accounting principles. In particular, the “matching” accounting principle sets out that expenses should be recorded in the same period in which revenue is earned from them. This means that, by using these GFF machines, completed GFF can be sold and revenue earned. Depreciations are then portions of fixed assets (the GFF machines) that have been considered consumed in the current period, and therefore expensed, irrespectively from whom the machines were purchased. The intent of this expense is to gradually reduce the carrying amount of fixed assets as their value is consumed over time.

(86)

Following disclosure, the applicant also claimed that, to the extent that the Commission would not simply remove the full depreciation of the GFF machines PGTEX transferred from its related company in China from the value added calculations, the determination of the depreciation amount must reflect the true useful life of such machines and related equipment. The applicant referred to the fact that it is not unusual for such machines to run for over 20 years.

(87)

The Commission rejected this claim as the applicant itself referred to a useful life of the GFF machines of about 10 years in its request. No evidence was provided concerning its statements that it is not uncommon that GFF machines run for over 20 years.

(88)

Concerning the rental cost, PGTEX Morocco did not provide its rental contracts in its reply in the exemption claim form, despite the important rental costs it incurred in 2020 (25). In its exemption claim form, it informed the Commission that it had installed all its GFF-machines at one location (plant - phase 1). It initially stated that it only rented this one plant as it stated that it “only has one production site”, despite the question in the exemption claim form to provide the addresses of all its production sites. Subsequently, PGTEX Morocco SARL, however, provided two rental contracts as a reply to the deficiency letter of the Commission, indicating that PGTEX Morocco SARL rented two separate premises from two different property owners during the reporting period. Since PGTEX Morocco SARL had claimed previously in its exemption claim form that the GFF-machines, which were operational during 2020, were only installed in one of these two rented plants, the rental amounts incurred in 2020 for the second plant (plant – phase 2) should have been excluded from the rental cost and value added cost. In addition, because of the low capacity utilisation, the Commission, in its value added cost calculation, could also not accept the total rental cost for the plant – phase 1 as it was not fully used due to the fact that the GFF-machines were not producing in the first quarter of 2020 and not running at full capacity during the other quarters of 2020. The total rental cost as reported was not accepted by the Commission because of the above reasons.

(89)

Following disclosure, the PGTEX Group argued that the Commission committed manifest errors of assessment and acted in breach of Article 13(2) of the basic Regulation as the Commission did not take into account the full rental cost.

(90)

The Commission rejected this claim, on the basis of the following statements that had been made by the PGTEX Group in the course of the investigation. First, in its reply to the deficiency letter (26), the PGTEX Group only referred to the plant – phase 1 for its production, its storage of raw materials and finished products, and the administrative area. Second, in its reply to the deficiency letter (27), the PGTEX Group stated that its GFF machines, which were running in 2020, were all located in plant - phase 1. Consequently, the Commission deducted that none of these machines, which were operational in 2020, were located in plant – phase 2. This was also corroborated by other statements of the PGTEX Group in its deficiency reply (28).

(91)

By adjusting the reported depreciation cost and rental cost, taking into consideration the issues explained above, the average value added thus established during the reporting period was found to be below the 25 % threshold set by Article 13(2)(b) of the basic Regulation. Some other cost items were found to be overstated as well, but were not adjusted as such adjustments should only have led to an even lower percentage of value added. The Commission therefore concluded that the value added to the parts brought in, during the assembly or completion operation, was less than 25 % of the manufacturing cost, as required by Article 13(2)(b) of the basic Regulation for these operations to constitute circumvention.

(92)

It was therefore concluded that the second criterion set out in Article 13(2)(b) of the basic Regulation was also met.

(93)

In accordance with Article 13(1) of the basic Regulation, the Commission examined whether the imports of the product under investigation, both in terms of quantities and prices, undermined the remedial effects of the measures currently in force.

(94)

Regarding quantities, the increase of imports of GFF from Morocco was significant, as explained in recital (46) above. The 2020 imports from Morocco were already ten times higher, from only 277 tonnes in 2019 to 2 809 tonnes in 2020. At the same time, the Union consumption for the year 2020 was estimated by the applicant to be in a range between 135 000 and 140 000 tonnes. The market share of the imports from Morocco represented more than 2 % in 2020.

(95)

Regarding prices, the Commission compared the average non-injurious price as established in the original anti-dumping investigation with the weighted average export CIF prices determined on the basis of the information provided by PGTEX Morocco SARL, duly adjusted to include post clearance costs. This price comparison showed that the imports from PGTEX Morocco SARL undersold the Union prices by more than 10 %.

(96)

The Commission concluded that the existing measures were undermined in terms of quantities and prices by the imports from Morocco subject to this investigation.

(97)

Following disclosure, the PGTEX Group claimed that the Commission’s calculation of the non-injurious price only reflected the situation prevailing in 2018. However, it provided no evidence that the non-injurious price used by the Commission was not accurate and/or had gone down since 2018. Therefore, the claim was rejected.

(98)

In accordance with Article 13(1) of the basic Regulation, the Commission also examined whether there was evidence of dumping in relation to the normal values previously established for the like product.

(99)

To this end, export prices of PGTEX Morocco SARL on an ex works basis were compared to the normal values established during the original anti-dumping investigation.

(100)

The comparison of normal values and export prices showed that GFF were imported at dumped prices during the reporting period by PGTEX Morocco SARL.

(101)

Following disclosure, the PGTEX Group claimed that the Commission’s calculations of the normal value were not sufficiently clear to comment upon and were based on a constructed normal value reflecting costs prevailing in 2018, which do not relate to Moroccan cost in 2020. However, it provided no evidence that the constructed normal value used by the Commission was not accurate.

(102)

The Commission rejected this claim. Dumping was calculated using the normal values previously established in accordance with Article 13 of the basic Regulation. These normal values were confidential as they were based on the normal values of the co-operating exporting producers in the original investigation and therefore, only the weighted average normal value could be disclosed to the PGTEX Group.

(103)

Based on the above findings, the Commission concluded that the anti-dumping duty imposed on imports of GFF originating in the PRC were being circumvented by imports of the product under investigation consigned from Morocco by PGTEX Morocco SARL. Given that the reported export sales of PGTEX Morocco SARL were higher than total imports to the Union from Morocco, and no other company in Morocco came forward to request an exemption, the Commission considered that PGTEX accounted for all export of GFF from Morocco to the Union. Thus, it concluded that the findings about circumvention practices found in respect of PGTEX Morocco SARL should be extended to the whole country.

(104)

No evidence was found concerning the circumvention of measures on GFF involving Egypt. As mentioned before, PGTEX Morocco SARL purchased all its glass fibre rovings from China and none in Egypt. The investigation as far as alleged circumvention of GFF originating in Egypt shall therefore be terminated.

(105)

Therefore, in accordance with Article 13(1) of the basic Regulation, the anti-dumping measures in force on imports of GFF originating in China should be extended to imports of the product under investigation.

(106)

Pursuant to Article 13(1), second paragraph of the basic Regulation, the measure to be extended should be the one established in Article 1(2) of Implementing Regulation (EU) 2020/492 for ‘all other companies’, which is a definitive anti-dumping duty of 69 % applicable to the net, free-at-Union-frontier price, before customs duty.

(107)

Pursuant to Article 13(3) of the basic Regulation, which provide that any extended measure should apply to imports that entered the Union under registration imposed by the initiating Regulation, duties are to be collected on those registered imports of the product under investigation.

(108)

PGTEX Morocco SARL was the only Moroccan company that requested an exemption from the possible extended measures in accordance with Article 13(4) of the basic Regulation.

(109)

As described above, PGTEX Morocco SARL was found to be involved in circumvention practices. Therefore, an exemption cannot be granted to this company pursuant to Article 13(4) of the basic Regulation.

(110)

On 20 December 2021, the Commission disclosed to all interested parties the essential facts and considerations leading to the above conclusions and invited them to comment.

(111)

The measures provided for in this Regulation are in accordance with the opinion of the Committee established by Article 15(1) of Regulation (EU) 2016/1036,